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Looking Into AMC Entertainment Hldgs's Return On Capital Employed

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AMC Entertainment Hldgs (NYSE: AMC) reported Q2 sales of $18.90 million. Earnings fell to a loss of $471.60 million, resulting in a 76.25% decrease from last quarter. AMC Entertainment Hldgs collected $941.50 million in revenue during Q1, but reported earnings showed a $1.99 billion loss.

What Is Return On Capital Employed?

Return on Capital Employed is a measure of yearly pre-tax profit relative to capital employed by a business. Changes in earnings and sales indicate shifts in a company's ROCE. A higher ROCE is generally representative of successful growth of a company and is a sign of higher earnings per share in the future. A low or negative ROCE suggests the opposite. In Q2, AMC Entertainment Hldgs posted an ROCE of 0.3%.

Keep in mind, while ROCE is a good measure of a company's recent performance, it is not a highly reliable predictor of a company's earnings or sales in the near future.

ROCE is an important metric for the comparison of similar companies. A relatively high ROCE shows AMC Entertainment Hldgs is potentially operating at a higher level of efficiency than other companies in its industry. If the company is generating high profits with its current level of capital, some of that money can be reinvested in more capital which will generally lead to higher returns and earnings per share growth.

In AMC Entertainment Hldgs's case, the positive ROCE ratio will be something investors pay attention to before making long-term financial decisions.

Q2 Earnings Insight

AMC Entertainment Hldgs reported Q2 earnings per share at $-5.44/share, which did not meet analyst predictions of $-4.18/share.

 

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